Labour had better get used to headlines of economic upgrades. There’s about two dozen major forecasters out there, and each will take a turn to say that Britain’s doing better than they’d thought. To have such good news repeated will be a headache for Labour, as Iain Martin blogs today. But Labour are right to latch on to the caveat: the GDP number are not much use to someone facing a decade of wage stagnation. Words can be deceptive in economics: if you read ten news stories from ten forecasters talking about upgrades, it doesn’t necessarily mean things are getting better. The Treasury recently released five-year forecasts from the people it follows (pdf, here) and it’s not much better than the fairly glum forecasts from the Office for Budget Responsibility.
Crucially, immigration is a factor in Britain. It wasn’t so long ago that Osborne’s Treasury was saying that GDP per capita, rather than the headline GDP figures given by the OECD et al, was the more important metric. But this basis, the recovery simply does not exist.
Labour will be trying to focus on wages. And much as though I hate to admit it, they have a point. As Ed West and I argued in a cover piece recently, Osborne’s recovery plan (based on monetary activism but fiscal conservatism) really is a plan for trickle-down economics. The official policy of QE involves reviving the economy by inflating assets.